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February price seasonals fade - Roy Smith
There are only five more days in February. Most of us in the Midwest are probably happy to see this month pass. I have some friends that go so far as to move to Arizona for the winter. I am not that anxious for warm weather. I will admit that when there is a wet heavy snowstorm, such as the storm on February 5, I think about escaping the winter. There are many reasons that February is a significant month to watch markets, even if the weather is lousy. I finally got around to updating my long term seasonal charts for a marketing meeting this week. It was interesting to compare the seasonal trends this year to previous years. The first and most obvious change in soybean and corn charts it that the price level is much higher this year than when looking back 30 years. That is not a surprise to anyone who has been farming for ten years or more. Most of the other seasonal events look somewhat similar except for the price level.
In the early days of my seasonal studies, there was a major low in the soybean futures market that I named “John Deere Low”, in recognition of the need for farmers to generate cash flow for payments on machinery and other inputs. That price dip in the winter no longer shows up as prominently on the more recent ten year charts.
The other big trend change is the tendency for soybean futures to rally significantly from January 1 through the spring. When I began doing market research, it was easy to make the case that it seldom paid to store soybeans through the winter. Interest and storage costs would eat up any price appreciation. In the most recent ten year seasonal analysis, May soybean futures rallied almost a dollar a bushel from December 1 through April 1. That is enough price improvement to make it worthwhile to at least be aware of what prices do during this time.
My long time principal of never selling soybeans in February still holds true, even if last year, 2011, selling in February was a winning idea. That is the first year in 30 years when the yearly high in the soybean cash price was in February.
In most years, I am busy doing marketing meetings in February. Usually by this time I am tired of being on the road. The calendar was not nearly as full this year because of scheduling problems. It was probably as well because I was recuperating from surgery on my hand on December 14. January was occupied with getting past the pain of the operation. Healing made excellent progress in February. I was officially released by my surgeon on Friday, February 24. Now I look forward to hauling some corn and trimming a few trees before warm weather arrives- if the thumb on my right hand allows.
The one other very important decision that farmers need to make in March is determining their crop insurance program for 2012. There have been some very important changes in the policies this year. It is important to give yourself time to study the various offerings to find out which fits your marketing and risk management needs the best. Price levels for the revenue-based policies will be determined by the futures price average in February. Those price averages will be available next Thursday.